Speaker : Shri Kantilal Jain, Advocate

Subject : Compliances under the MVAT Act, 2002

The 7th Study Circle Meeting for the year 2006-07 was held on 15th December, 2006 at the S.T.P. Association Library.

At the outset, the learned speaker said that though the subject allotted to him is general, it is of great importance. Detailing the various compliances under the MVAT Act, 2002, he analysed them as follows.

1. Direct compliances by the dealer to the Dept. such as making an application for Registration and Filing of Returns.

2. Maintenance of Records: To keep dealer’s own records as per the requirements of the law and deduction of TDS etc.

3. Compliances from buyer’s or seller’s point of view viz. taking benefit of concessional rate of tax.

Compliances for Registration

Explaining each situation, the learned speaker first referred to the application for registration.

He said, compliance will depend on what basis the application for registration is made; i.e., whether on the basis of turnover, or voluntary or on succession/transfer of business.

The learned speaker further said that if a dealer has exceeded the turnover of sales of Rs. 5 lacs and purchases or sales of taxable goods
Rs. 10,000, he has to apply for registration within 30 days. In case of voluntary registration no turnover limits are applicable.

If there is a case of succession of business, the legal heir of the deceased proprietor has to apply for registration within 60 days from the date of death and in case of transfer of business either wholly or in part, the transferee has to apply for registration within 30 days.

Documents to be attached with the application for Registration:

The learned speaker said that the application for registration should be made in Form No. 101 and as regards various documents to be attached with Form No. 101, reference should be made to the Trade Circular Nos. 4 T and 5T of 2005 dated 4th May, 2005.

As far as application for voluntary registration is concerned, the learned speaker drew attention to one additional requirement of getting introduction from a registered dealer who is holding R.C. for more than 5 years or signature of a Chartered Accountant or an Advocate or STP.

Narrating the documents required to be attached with the application, depending upon the constitution of the dealer, the documents /proof that will have to be complied with are: Memorandum of Association & Articles of Association/Partnership Deed, proof of place of business, place of residence, Bank Account, P.A.N. No., Court fee stamps & challan for registration fees paid at Rs. 500 and Rs. 5,000 in case of voluntary registration.

In case of succession of business, apart from the above, the additional proof that will be required is, Transfer Deed and / or Death Certificate. The learned speaker further said that if a registered dealer is a partnership firm, a company, a HUF or Association of Persons he is required to appoint a person who will be ‘Deemed Manager’ of the business. Particulars of deemed manager along with his signature are to be filled in Form No. 105 duly signed by the dealer and this Form is to be filed with the dept. along with the application of registration. In case of succession, Form No. 105 is to be filed within 30 days. The learned speaker cautioned that non–compliance (not filing Form No. 105) will attract imprisonment for 6 months and a fine.

Change in business

The learned speaker said that the following changes in business are required to be intimated to the department within 30 days by a registered dealer:

1. Transfer of business to another person; i.e., changes in ownership of business.

2. Change in the name of business

3. Change in place of business

4. Insolvency

5. Liquidation

6. Merger, Demerger and acquisition

The documents required will be the proof of relevant event e.g., Transfer Deed in case of transfer of business.

The learned speaker cautioned that non-intimation of above changes is an offence u/s. 57 and a dealer is liable to punishment of 6 months imprisonment and a fine.

Cancellation of Registration

Filing of returns

The learned speaker explained that depending upon the nature of his business, every registered dealer is required to file the periodical VAT and CST returns within the prescribed time limit in the prescribed forms; e.g., Form No. 221, 222, 223, 224 and 225.

The learned speaker raised a point that in case of a dealer who is a normal dealer and also a Works Contractor, return in Form No. 223 is required to be filed. But if such dealer does not have in any month or quarter any Works Contract activity, in which Form he should file his return? In the opinion of the speaker this point is not clear in the rules.

Referring to the dealers in backward area, the learned speaker said that such a dealer is required to file his returns in Form No. 224. But if such dealer is having Works Contract activities or leasing activity in backward area, he is required to file returns in two Forms viz., in Form No. 224 and also in Form No. 223. Similarly, if a dealer in backward area has some business activities outside the backward area also, he is required to file returns in Form No. 224 as well as in Form No. 221. The periodicity of filing of returns by a backward area dealer is quarterly.

Returns for more than one place of business

A dealer having more than one place of business or different constituents of business in Maharashtra, is allotted one TIN number. Such dealer is required to file only one return for all places of business or for all constituents of business. However if he wishes to file separate returns for separate places, he is required to seek permission to file separate returns in the prescribed Form which is Form No. 211. There is no time limit for such application. Without the permission, a dealer cannot file separate returns.

True A/c of Sale and Purchase

Referring to the maintenance of record, the learned speaker said that every dealer has to keep a true account of sale and purchases and stock of goods and record of receipts and payments in respect of purchase and sale of goods.

Rule 55

The learned speaker reminded the members about provisions of Rule 55 which sets conditions to avail of set-off of taxes paid on purchases and the records required to be kept for the same. Entries for goods returned should be passed through Debit Notes and/or as the case may be through Credit Notes, showing separately tax element for the purpose of adjusting the same against tax payable or set-off available. The learned speaker said that these records are required to be preserved for a period of 5 years. Non-compliance of this will attract punishment of 6 months imprisonment and a fine.

Tax Invoice – Cash Memo – Bill

The learned speaker explained in detail the compliance in respect of preparing, issuing, maintaining and preserving the Tax – invoices, cash memos and bills. This should be preserved for a period of 3 years. If a dealer is preparing cash memos and bills on an Electronic Accounting System and if such system is approved by the Commissioner, then he is not required to preserve duplicate copies of cash memos and bills. Such cash memos and Bills are not required to be signed also. However Electronics Accounting System is not permitted for tax – invoices.

Vat – Audit

The learned speaker explained in detail the provisions of Vat Audit as applicable to various classes of dealers. Informing about the turnover limit for Audit and submission of the Audit Report to the appropriate authority within the prescribed time – limit, the learned speaker cautioned about the penalty for non–compliance of the Accounts getting Audited, which is to the tune of 1/10th per cent turnover or Rs.1 lakh whichever is less.

Amalgamation & demerger of companies

Distinguishing the transfer of business from amalgamation and de-merger, the learned speaker said that the latter requires the permission of High Court. The same will take effect from the date of High Court Order. In that case, one company is required to make application for cancellation in Form No. 103 within 30 days and other company is required to intimate to the department, such changes within 60 days along with copy of High Court Order.

T.D.S & Works Contract

Notification dated 29-8-2005 lists the entities/dealers who are required to deduct Works Contract Tax and the rate at which the same is required to be deducted. As regards the Co-op Housing Society, the learned speaker opined that if a housing society has given a contract for Rs. 10 lakhs or more either in previous year or in current year, tax is required to be deducted. A dealer registered under the MVAT Act, is required to deduct tax if the contract value in aggregate exceeds Rs. 5 lakhs. The rate of deduction is 2% if the dealer is registered and 4% if the dealer is not registered.

The learned speaker also explained the situation where the tax is not required to be deducted viz., if the sub-contractor is making payment of taxes and any transaction is deductible u/s. 8 of the MVAT Act. The Certificate for deduction at the lower rate can also be obtained.

Composition schemes

The learned speaker then said that in order to continue under the composition scheme, the application should be made preferably before the start of the relevant year.

Refund

The application for refund should be made in Form No. 501 within 3 years. If a dealer does not apply for refund in Form No. 501, the Government is not bound to give refund. In other words, application for refund has been made mandatory. The learned speaker explained the various categories of dealers to whom refund is to be granted. He also explained procedure for early refunds and furnishing the bank guarantees wherever required.

The meeting was then concluded with a hearty vote of thanks to the learned speaker.